Demand for Banco do Brasil Bonds Seen Above EUR2 Billion – Sources

Banco do Brasil S.A. will sell euro-denominated bonds on Thursday at a yield of 3.875%, while demand for the issuance has topped EUR2 billion, according to two people close to the transaction.

Latin America’s largest bank in terms of assets plans to sell around EUR500 million in bonds, the people said, as it moves quickly to tap the international debt market to take advantage of the improvement of capital market conditions, as global markets have calmed after comments by U.S. Federal Reserve Chairman Ben Bernanke the day before.

Brazilian borrowers have largely been unable to borrow in recent months amid concerns that the Federal Reserve would reverse its easy-money policies designed to jump-start the U.S. economy. A shift away from monetary easing will tend to raise U.S. interest rates, siphoning investment money away from emerging markets and back to the U.S.

In congressional testimony Wednesday in Washington, Bernanke said an eventual shift in Fed monetary policy away from the current easing trend will be gradual. He said the Fed will give investors ample warning of the eventual policy shift.

Banco do Brasil is tapping the market for the first time since January, when it then sold $2 billion in perpetual bonds aimed at improving its financial position and helping it maintain a rapid pace of credit growth.

“Banco do Brasil is a well-known bank among international investors. There is no need to hold a road show. When the (capital) market conditions improve, as we’ve seen since yesterday, the bank can tap it quickly, in a matter of hours,” said a person close to the operation who declined to be identified.

The bank’s press officials weren’t immediately available for comment.

The bank will issue the latest bonds under its global medium-term note program, which has a limit of $5 billion, and it is planning to use the proceeds for general banking purposes, according to Standard & Poor’s Ratings Services.

Lending in Brazil has surged in recent years from very low levels amid low unemployment and rising salaries. Credit grew around 16% in 2012 and it is expected to slow slightly this year, but it will remain at around 14%.

The Brazilian government is using state-run banks, such as Banco do Brasil and Caixa Economica Federal to lead the expansion of credit in the country in an effort to fuel economic activity.

BB Securities Bradesco BBI Deutsche BankHSBCJ.P. Morgan and Santander are coordinating the bond issue, expected to be priced later Thursday, said the person close to the operation.